01—Abstract
Summary
Summary of the 10-Q filed August 9, 2016. Cited figures are marked; the original filing is the authoritative source.
CBRE Group, Inc.'s (CBRE) Q2 2016 report indicates significant revenue growth, primarily driven by the acquisition of Johnson Controls' Global Workplace Solutions (GWS) business in September 2015.
This strategic acquisition substantially increased revenue across all segments, particularly in Americas and EMEA. Despite the revenue surge, net income saw a slight decrease compared to the prior year quarter, largely due to higher costs associated with integrating the GWS acquisition and cost-elimination projects. Foreign currency fluctuations, particularly the weakening British Pound Sterling, also impacted reported results.
While the company highlights strong organic growth in property, facilities, and project management, as well as increased commercial mortgage brokerage and leasing activity, investors should note the increased cost of services as a percentage of revenue, a trend largely attributed to the GWS acquisition's cost structure. The company reiterates its confidence in its liquidity and ability to meet financial obligations through internally generated cash flow and its revolving credit facility.
02—Key points
Key Highlights
- Total revenue increased by 34.2% to $3.21 billion for Q2 2016 compared to Q2 2015, heavily influenced by the GWS acquisition contributing $690.3 million.
- Net income attributable to CBRE Group, Inc. decreased slightly to $121.7 million in Q2 2016 from $125.0 million in Q2 2015.
- Cost of services as a percentage of revenue rose to 70.3% from 62.2% in the prior year quarter, primarily due to the GWS acquisition's cost structure.
- The EMEA segment experienced a significant revenue increase of 64.2% driven by the GWS acquisition, though it also saw higher cost of services as a percentage of revenue.
- Foreign currency translation had a negative impact on revenue, particularly due to the weakening British pound sterling.
- The company has $2.6 billion available under its $2.8 billion revolving credit facility, indicating strong liquidity.
- The report highlights ongoing cost-elimination projects aimed at enhancing future margins.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, CBRE Group, Inc. kept $0.04.
- Revenue$3.21B100.0%
- Cost of revenue−$27.2M0.8%
- Gross profit$3.18B99.2%
- Operating costs−$3.00B93.5%
- Operating income$182.6M5.7%
- Interest, other & tax−$60.9M1.9%
- Net income$121.7M3.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed August 9, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $3.21B$2.39B | +34.2% |
| Cost of Revenue | $27.18M— | — |
| Gross Profit | $3.18B— | — |
| Operating Expenses | $3.02B$2.17B | +39.5% |
| Operating Income | $182.59M$228.75M | −20.2% |
| Interest Expense | $36.99M$26.15M | +41.4% |
| Net Income | $121.67M$125.03M | −2.7% |
| EPS (Basic) | $0.36$0.38 | −5.3% |
| EPS (Diluted) | $0.36$0.37 | −2.7% |
| Shares Outstanding (Basic) | 335.08M332.00M | +0.9% |
| Shares Outstanding (Diluted) | 338.08M336.15M | +0.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant revenue increase in Q2 2016?
The primary driver was the acquisition of Johnson Controls' Global Workplace Solutions (GWS) business, completed in September 2015. This acquisition contributed substantially to revenue across all segments, particularly in the Americas and EMEA regions.
Why did net income decrease slightly despite the large revenue increase?
The slight decrease in net income was primarily due to increased costs associated with integrating the acquired GWS business and expenses related to cost-elimination projects aimed at improving future margins. These higher costs offset some of the revenue gains.
How did foreign currency fluctuations affect CBRE's results?
Foreign currency fluctuations, especially the weakening of the British pound sterling against the U.S. dollar, had a negative impact on reported revenue and operating results. The company actively uses derivative instruments to mitigate some of this risk.
What is the company's liquidity position?
CBRE Group, Inc. maintains a strong liquidity position with $2.6 billion available under its $2.8 billion revolving credit facility. The company believes its internally generated cash flow and credit facility are sufficient to meet its working capital and funding requirements.
06—Continue